Macau proves recession proof

Despite high profile setbacks, Macau International Airport’s cargo traffic continues to grow, with a surge in traffic in the last quarter of 2001 enabling the airport to shrug off the global downturn. Peter Conway reports.

For most airports, the question in 2001 was not so much how much growth they achieved, as how small a fall in volumes they were able to get away with. In a year when even major hubs saw double digit falls in air cargo tonnage, no airport could surely expect to see growth.

Yet for Macau International Airport it was as if the global slowdown and the disruption following 11 September never happened. The airport not only saw a 11.7 percent rise in volumes to 76,076 tonnes in 2001; it even saw growth quicken in the last few months of the year.

In the first eight months cargo growth was a modest 3.7 percent, and for the month of August volumes were just 2 percent up on the previous year. In December, by contrast, tonnage was a massive 21.6 percent higher than the same month in 2000.

Edward To

Edward To, marketing manager for CAM, the operators of Macau Airport, is in no doubt as to the reason for this success.

"It is due to the advantages of our location,” he says. “There was a slowdown everywhere in the world last year, except in China. The Chinese economy has continued to forge ahead, and we are ideally placed to benefit.”

Looked at another way, it may be that everything is at last coming together for Macau, which has had its ups and downs since it was opened in 1995.

Seen at first as an alternative to Hong Kong’s crowded Kai Tak airport, many expected the airport to fade once Chek Lap Kok opened in 1998. In fact, CLK’s teething troubles helped Macau record a 43 percent jump in volumes in 1998 to 65,167 tonnes, with sharply increased traffic between July and October that year.

The following year was inevitably going to be a disappointment when set against those figures, but Macau still managed to make some gains, clocking up 53,118 tonnes, a fall of 18.5 percent. Growth was back on track in 2000, with a 28.2 percent rise to 68,085 tonnes, and, as has been seen, the upward trend continued throughout 2001.

Macau has managed that growth despite losing some high profile freighter customers. Scandinavian carrier SAS, for example, was one of the most loyal customers of the airport, routing Atlas-leased B747 freighters into it right from its opening in 1995, with the flights carrying on to Osaka in Japan.

But once it started sharing MD-11 freighters with partner Lufthansa Cargo during 2000, those flights were lost to Hong Kong, because this was the hub served by other Lufthansa services.

"Airline alliances do a lot of damage to small airports,” says To ruefully. "SAS were always very happy here and would not have stopped flying to Macau if it were not for Lufthansa."

MASKargo’s choice of Macau as a stop on its twice weekly round the world B747F flight via the US and Hahn in Germany was also a boost for the airport when it was launched in 2000, but that too proved shortlived, terminated when the carrier’s management changed and scrapped the former freighter strategy.

	Flag carrier Air Macau, which is to be taken over by China National Aviation Corp (CNAC), is in talks with the Shenzhen Airport Group to launch a ftwice-daily reighter service between Shenzhen and Taipei with an intermediate stop in Macau this month. The airline will also launch passenger services to Chengdu, Shijiazhuang and Xian in China and to Singapore in the second half of this year.

Macau has managed always managed to find new customers to replace those that pulled out, however.

Late in 2000, Panalpina started operating weekly B747 freighters from Luxembourg into Macau, using an MK Airlines B747-200F, and in the last quarter of 2001 EVA Air, which had previously operated some cargo charters into Macau, started a weekly MD-11 freighter to the airport. This is due to be increased to twice a week from April.

Both To and Max Hill, manager cargo services Asia Pacific for Menzies Aviation Group, which acquired a 29 percent stake in Macau’s monopoly cargo handler when it took over the Ogden group in 2000, are hopeful of increasing these services. Hill says EVA is looking at a possible third weekly flight later in the year, and that Panalpina is considering a second weekly flight, possibly as part of a round the world route.

Macau also has a loyal freighter customer in Singapore Airlines, which has also been operating into the airport since it opened. It currently operates three weekly B747-400Fs from Singapore to Macau, flying on to Los Angeles and New York in the US. A possible new B747F customer was signalled in March when Atlas enquired about three weekly slots into the airport.

Freighter traffic of this kind is something every cargo airport longs to get, but in fact booming passenger traffic has been even more important than freighter flights to Macau’s cargo growth.

Passenger numbers jumped 22.7 percent in 2000 and 17.5 percent in 2001, and cargo has come with these flights. Belly cargo in fact accounts for 70 percent of cargo volumes through the airport.

Not surprisingly, Macau’s strongest links in this respect are with mainland China. It is served by several of the PRC’s carriers, including China Southwest, China Northwest, Yunnan Airlines, and Xiamen Airlines. Destinations include Shanghai, Nanjing, Qingdao, Fuzhou and Beijing.

One passenger carrier that has particularly helped cargo growth at Macau in the last couple of years according to Hill is Shanghai Airlines. “Three years ago they operated two 737s a week into Macau: now it is three or four 767s daily,” he says.

The vast bulk of the cargo carried on these flights is interlined onto EVA Air, which in addition to its freighter flights now has five widebody passenger flights a day into Macau. Once again, it has been upping capacity on the routes, replacing 747s with 767s, and 767-200s with higher payload 767-300s.

	EVA Air will operate a twice-weekly MD-11 freighter to Macau from this month, with possibly a third weekly freighter service later this year.

Once passenger carriers increase their cargo capacity in this way, Hill says, it is quickly filled up, suggesting that there is plenty of unmet cargo demand waiting to be tapped. It is not only EVA that is introducing freighters to Macau as a result. Taiwanese rival TransAsia, which has three to four flights a day into the airport, is also introducing a seven tonne ATR freighter twice daily into Macau, according to Hill.

Macau is also a favoured stop for charter operators, particularly those wishing to reach Hong Kong or the PRC. For example, the airport is popular with AN-124s, not so much for the movement of the outsized loads for which the Russian freighter is famous, but for general cargo loads. Hill says one frequent cargo is Sony Playstations and other such consumer electronics, usually destined for Europe.

Traffic rights are one of Macau’s key weapons in this respect. The territory effectively operates an open skies policy and offers quick approvals to applications for flghts. “Here everyone – the airport, the government, Customs and so on - works as a team with a common objective,” says Hill.

By contrast, getting rights into Guangzhou or Shenzhen is a much more complex process, while Chek Lap Kok, even though it has relieved the chronic shortage of slots of Hong Kong’s Kai Tak days, still cannot offer the flexibility on peak hour slots that Macau can.

The airport is now using these advantages to try and win more freighter traffic in its own right, and also to target charter operators who fly into the PRC but have to return to Europe empty due to a lack of traffic rights out of the PRC.

"We are saying, why not come to Macau and fill up with cargo? We have plenty to go round,” Hill says.

The plenty comes from the airport’s strategic location next to one of the best Chinese cargo markets – the area along the west side of the Pearl River from Macau to Guangzhou, which is one of the prime manufacturing locations in China.

It was one of the first areas in the PRC to open to foreign investment, and has attracted a lot of Taiwanese investment in particular.

	iMax Hill, manager cargo services Asia Pacific for Menzies Aviation Group (left) and Trevor Warburton, managing director of Menzies Macau.

“They started a long time ago with shoes, and then garments, and now they have moved into hi-tech items,” To says. “You could say that we have all the main airfreightable products on our doorstep.”

While this has always been the case, in the past the infrastructure and customs formalities between Macau and the PRC were something of a deterrent to carriers. That all changed with the handover of the territory from Portugal to the PRC in December 1999.

Firstly, the handover coincided with the opening of a series of road and infrastucture projects, including a six lane freeway to Guangzhou, which has made reaching the airport that much easier.

Secondly, since the handover, says To, there has been a greater harmony between Macau and its neighbouring airports and government authorities in the PRC. “The attitude is different now. We work more efficiently with those across the border, and they have a more positive outlook towards us,” he says.

The new atmosphere even led to a meeting last July between the airports of Macau, Hong Kong, Shenzhen, Guangzhou and Zuhai to “discuss on a friendly basis how we can coordinate and develop the area”, as To puts it. The five have committed themselves to meet on a regular basis and have promised further initiatives in areas such as human resources, training and equipment sharing.

The ease with which cargo can be moved from the PRC into Macau means it is now even attracting cargo from Shenzhen on the other side of the Pearl River Delta, according to Hill. “It is only two hours by road from Shenzhen, and that can be less time than it takes for cargo to get to Chek Lap Kok, what with all the cargo travelling into Hong Kong and the consequent congestion at the border,” he says.

SIA Cargo operates three weekly B747-400Fs from Singapore to Macau, flying on to Los Angeles and New York.

This is particular true when traffic congestion within Hong Kong is taken into account. By contrast, Macau airport is a matter of minutes from the territory’s border with the PRC.

To reckons that the region’s importance will only grow with China’s accession to the World Trade Organisation.

"Thirty percent of China’s exports and imports already come from the Pearl Delta region, and it generates 47% of the country’s GDP, so you can just imagine the potential,” he says.

"When we first opened, shippers, forwarders and carriers only knew one name – Hong Kong,” he adds. ‘Now they are starting to notice us.” An example is Panalpina. “Until a couple of years ago they were based in Hong Kong. Now they have an office here and are increasingly seeing the potential of Macau.”

To also points to Menzies Macau, as the sole cargo handler at Macau is now known, as a key selling factor. “They provide an excellent quality of service,” he says. The service includes the ability to clear cargo within an hour.

Trevor Warburton, managing director of Menzies Macau, also claims that in its six years of operation, the handler has never had a complaint for lost or damaged cargo.
"It is down to the work ethic of people here, and the fact that we are a small airport where details do not get overlooked,” he says. "Small means uncomplicated. We facilitate things for the user," agrees To.

Warburton also cites the efficent ground handling for passenger planes as a reason why carriers are drawn to Macau. "We have a cleaning operation, and with the exception of one small incident recently, I can honestly say that it has never delayed a flight."

There is one cloud on Macau’s horizon, however – the much discussed and much postponed start of direct flight between Taiwan and China. There is no doubt that Macau owes a large chunk of both its passenger and cargo business to Taiwan, which uses the airport as an intermediate point on flights into the PRC. Much of its belly cargo in particular is due to PRC and Taiwanese carriers interlining.

To does not hide that direct flights could be damaging to Macau, and says it is something the airport needs to face, but he is not immediately worried.

	Menzies Macau operates modern and efficient cargo terminal at Macau airport.

"It won’t happen for at least two years, and when it happens, it will not b2e all at once," he says. "I don’t think they would open all mainland airports to Taiwanese carriers immediately. Since both Beijing and the regional government in Guangzhou now full support Macau, I would be surprised if they took any decisions that would damage our prospects

"You have to also bear in mind that direct flights would mean a big increase in traffic, and with Taiwanese investment in this region, we would be in a good position to capture a significant share of that. We try to look at direct flights in this light, as an opportunity, not a threat."

Hill agrees: "I think it will have a positive impact, not the doom and gloom that people are predicting,” he says.

One other problem for Macau when trying to woo carriers might be that is has something of an imbalance in traffic: export volumes are twice imports, with the former accounting for around half volumes, and the latter a quarter.

The remaining quarter comes from transit cargo, mainly between Taiwan and China, but also to Singapore and the US via the Singapore Airlines flight. To says Macau is keen to build up its transit traffic, and one boost it may shortly receive in this respect could be from Macau’s own airline, Air Macau.

It now operates passenger flights to destinations within the PRC as well as Bangkok, Manila, Taipei and Kaoshiung using A320s and A321s, but has long been looking at a freighter operation.

The freighter would exploit its special position as a carrier able to operate to both Taiwan and the PRC, and would probably be a 727 freighter with a Taipei-Macau-Shenzhen routing. In March, Air Macau requested 21 weekly slots for the service, suggesting that it might finally be close to realising this plan.

Another help to transit cargo would be a logistics centre which is being proposed for a 20 hectare near the airport, border and container port.

Also under discussion in the territory for some years, this did finally reach the tender stage during 2001, according to To, though he says the government has still not released any further details of the scheme.

The clear intention would be to try and encourage companies to use Macau as a distribution hub. Hill says the centre might also work hand in hand with the free zone just across the border in Zuhai.
Macau also commissioned a study from the Centre for Asia Pacific Aviation during 2001 to look at future strategies for the future of the airport. The study reported in August, but, says To, the digest of the report is still with Macau’s government and awaiting its response.

Broadly, he says, the report looked at ways to enhance Macau’s facilities and how it might benefit from the growth the WTO might bring. Both developments in physical infrastructure and areas such as human resources and regulation were looked at, but details will not be unveiled until the plan receives government approval.

Copyright for all texts and pictures: Payload Asia, Singapore. This report is brought to you in partnership with Payload Asia, the air cargo/express magazine for the Asia-Pacific and Middle East regions. To learn more about Payload Asia, please visit their website.